I don't have a car personally but I've always wondered - if you're a good driver (no hard braking, no accidents, not taking turns too fast, making full stops) but you drive, say, 10-15mph over the speed limit on the highway does that count against you? Yes I realize in some people's opinions what I just said is the opposite of good driver.

They make money because they're rewarding good drivers with lower rates. More good drivers into the insurance pool = bigger spread of risk = more money for them.

Let's say you have 10 people paying $1000 a year for insurance. 5 of those are good drivers, 5 are bad. You have 2 claims for $4000, so the insurance company only makes a $2000 profit. (this is excluding administrative costs, an 80% loss ratio isn't good either. Typically you need to be under 70% to be profitiable)

With snapshot, progressive is targeting the "Preferred" insurance market. A lot of people consider Progressive to be where you go when you can't get insurance anywhere else... which is true, Progressive will take anyone who has a license, but they are trying to get more of the "good" risks to balance out the "bad" ones, and luring customers in with a 30% discount for good driving is a good way to do it.

If they lure in 5 new Preferred customers with snapshot, and they pay $500 a year, and still have the same 2 claims totalling $8000, now we have $8k losses on $12.5k written premium, for a respectable 64% loss ratio.

This is all my opinion as an agent, and none of this has been said by any Progressive rep, but it's how I see it developing.